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CANADIAN AVIATION INDUSTRY REVIEW

In this issue… Features Columns: • Airline Market Capitalisation (p.1) • The Enthusiasts’ Corner (p.2) • The Caribbean Report (p.10) • The Asia Report (p.11) • The European Report (p.12) • The Ottawa Report (p.13) • The Washington Report (p.14)

Regular Reports: • Airline Data - Canada (p.3) • Airline Data – U.S. (p.4) • Selected Canadian Airport Data (p.5) • Industry News (p.6) • InterVISTAS News (p.15)


2007 AIRLINE MARKET CAPS February 2008

Market capitalisation for the global airline industry remained stable over the past year, with no overall change in December 2007 over December 2006. However, over a two-year period, the market cap showed 46% growth from December 2005. In Canada, market capitalisation for Canadian airlines measured nearly CAD$6.1 billion, up 28% in December 2007 over the same month last year. The increase in Canadian market caps was largely due to the performance of WestJet, up 59% at year-end 2007 to CAD$2.9 billion. Air Canada, on the other hand, recorded a 29% decrease in market cap value over the same period, to CAD$1.2 billion in December 2007. Figure 1 provides a comparison of market cap for these two major Canadian carriers, as well as select U.S. and foreign carriers. It is interesting to note that WestJet’s market cap exceeds that of some major U.S. carriers.

Internationally, European carrier Ryanair had a market cap value of nearly US$6.1 billion, down by 52% from 2006, while Asian carrier China Eastern’s market capitalisation was up 3 fold over 2006 to US$4.8 billion in December 2007. Overall, European airline market capitalisation increased by 1% in December 2007 over December 2006, while airline market caps for the Asia-Pacific region grew significantly by 13% over the same period. Figure 1: Airline Market Capitalisation by Carrier (US$ billions) Canada

14

US – Full Service

US – Low-Cost

US – Misc. International -52%

-20%

12 10 8 -64%

6

-15% -60%

-75%

348%

1463%

4 59%

2

-63%

-29%

-56%

251%

-41%

Ryanair

China Eastern

2007

Alaska Air

Southwest

JetBlue

Frontier

AirTran

United

Delta

Northwest

American

Continental

WestJet

2006

US Airways

-30%

0 Air Canada

Project Analyst

Overall U.S. airline market capitalisation amounted to more than US$31 billion at year-end 2007. However, U.S. airline market caps declined by 13% in December 2007 over December 2006. As illustrated in Figure 1, U.S. full service carriers (FSCs) showed mixed results, with significant increases in market cap levels for Delta (nearly 15 fold) and Northwest (251%), as both exited from Chapter 11 bankruptcy protection in Spring 2007, and drops in market cap levels for American (64%), Continental (60%) and United (15%). U.S. low cost carriers (LCCs) with lower market capitalisations in 2007 include JetBlue (63%), AirTran (41%), Frontier (30%), and Southwest (20%). US Airways and Alaska Airways also showed decreases in market cap levels, by 75% and 56%, respectively.

Market Capitalisation ($US billions)

Connie Chang

Source: Canadian Carriers: Air Canada and WestJet 2006 Annual Reports and Toronto Stock Exchange. U.S. & International Carriers: Aviation Daily Stock Performance, December 2007. Notes: Air Canada and WestJet prices in Canadian dollars. U.S. & International carriers in U.S. dollars. Global and regional market cap data are derived from the Dow Jones Indexes.

Page 1 February 2008

InterVISTAS’ Canadian Aviation Intelligence Report Copyright ©2008 InterVISTAS Consulting Inc., all rights reserved.


THE ENTHUSIASTS’ CORNER February 2008

This month, we invite Howard Mann of InterVISTAS' Washington office to comment on news for aviation buffs and on some of his favourite internet sites. Howard daily tracks aviation news including aircraft deliveries, new liveries, manufacturing progress of new aircraft designs, airport infrastructure improvements, and just about everything else that is aviation related. You would be hard pressed to find a greater aviation enthusiast anywhere.

Looking for that key upgrade?

Howard Mann Director Policy & Market Analysis

Being a loyal frequent flier means that you get to participate in various upgrade programs on your airline or their partner airlines. But how does one make sure you are looking for the right flight to upgrade on? With www.seatcounter.com you can get a good look at what booking classes have inventory available on various flights. This can help when looking to use e-upgrades, mileage upgrades, etc. on longer routings. Another good way to double check availability in the next class of service is to do a manual online search for the flights you are looking for!

Who needs actual bookshelf space in their office? Not with all of this technology! Is your office overrun with beautiful airplane models? Did your spouse or roommate tell you that you had to bring your models to work or else? Do you have wonderful models that include classic paint schemes, special paint schemes, and paint schemes of various Canadian airlines that are no longer in business? Have you dreamed of making an office shelf an actual airport? Well, the fine people at Gemini Jets have created an airport layout mat complete with tugs, gates, terminal buildings and taxiways. Check an the airport terminal site at http://www.geminijets.com/terminal/

Recent New Liveries To be a true aviation geek, you have to be up on the latest liveries introduced at your local airport! Check out some of the newest updates:

Left to Right (New Air Berlin Livery, New Spirit Airlines Livery, Air China 2008 Olympics livery)

Page 2 February 2008

InterVISTAS’ Canadian Aviation Intelligence Report Copyright ©2008 InterVISTAS Consulting Inc., all rights reserved.


AIRLINE DATA – CANADA Traffic and Load Factors on Canada’s Major Air Carriers January 2008 Air Carrier

Passenger Traffic Revenue Passenger Kilometres % Change % Change over 2007 from 2006

Capacity Available Seat Kilometres

Load Factor

% Change over 2007

% Change from 2006

Change over 2007

Change from 2006

Air Canada1

+3.4%

+6.2%

+3.3%

+5.6%

+0.1pts (to 78.7%)

+0.6pts (from 78.1%)

Domestic (Mainline)

+4.0%

+10.0%

+3.2%

+5.0%

+0.7pts

+3.6pts

Jazz

+8.1%

+29.0%

+7.8%

+23.0%

+0.1%

+3.2%

International & Charter

+3.2%

+5.3%

+3.4%

+5.8%

-0.1pts

-0.3pts

+16.2%

+39.4%

+15.7%

+38.1%

+0.3pts (to 76.2%)

+0.7pts (from 75.5%)

WestJet

Analysis: •

Air Canada Mainline’s domestic sector achieved a 79.5% load factor in January 2008, up 0.7 percentage points over the same month in 2007. This reflects domestic passenger traffic growth of 4.0% and an increase in seat capacity of 3.2% during the same period. This is the first time in the past five months that traffic growth has exceeded seat capacity increases. Air Canada Mainline’s international sector experienced a slight decline in its load factor by 0.1 percentage points, in January 2008 over January 2007, as international seat capacity expansion exceeded passenger traffic growth. Passenger traffic to the United States and the Pacific region decreased by 2.3% and 2.4% respectively, in January 2008 compared to January 2007.

Air Canada Domestic Mainline

10% 8% 6% 4% 2% 0% -2% Nov

Dec Jan- Feb 07

Mar

Apr

M ay Jun

Dom RPK

Jul

Aug

Dom ASK

Sep

Oct

Nov

Dec Jan08

Jazz data is not included in this graph

Air Canada International 6% 5% 4% 3% 2% 1% 0% -1% -2% Nov

Dec

Jan- Feb 07

Mar

Apr

M ay

Jun

Int'l RPK

Jul

Aug

Sep

Oct

Nov

Sep

Oct

Nov Dec Jan08

Int'l ASK

Dec

Jan08

WestJet 35% 30% 25% 20% 15%

10% WestJet had a record high January load 5% factor of 76.2% in 2008, up 0.3 0% Nov Dec Janpercentage points compared to January 07 2007. This represents the 12th consecutive month where passenger traffic growth outpaced increases in seat capacity levels.

Feb

Mar

Apr May Jun

RPK

Jul

Aug

ASK

Air Canada Mainline consists of all Air Canada operations with the exception of Jazz. Page 3 InterVISTAS’ Canadian Aviation Intelligence Report February 2008 Copyright ©2008 InterVISTAS Consulting Inc., all rights reserved. 1


AIRLINE DATA – U.S. U.S. Airlines Release January 2008 Traffic Figures

1

2

2

3

Notes:

(RPMs – millions)

(ASMs – millions)

Capacity

Load Factor

2,078 ↑7.2%

2,750 ↑8.0%

75.6% ↓0.5pts

635 ↓4.0%

973 ↓5.3%

65.3% ↑0.9 pts

5,485 ↑5.9%

8548 ↑5.3%

64.2% ↑0.4 pts

7,220 ↑2.9%

9,396 ↑2.1%

76.8% ↑0.5 pts

8,728 ↓5.3%

11,414 ↓3.4%

76.5% ↓1.5 pts

10,916 ↑0.2%

14,257 ↓1.5%

76.6% ↑1.3 pts

9,076 ↑2.5%

12,017 ↑0.2%

75.4% ↑1.7 pts

6,132 ↑2.9%

7,731 ↑1.1%

79.3% ↑1.4 pts

4,639 ↓0.9%

6,173 ↓2.7%

75.2% ↑1.4 pts

293 ↑2.4%

377 ↓6.9%

77.8% ↑7.1 pts

1,216 ↑14.4%

1,804 ↑5.5%

67.4% ↑5.2 pts

754 ↑18.3%

1,040 ↑6.4%

72.5% n/a

Traffic

Airline

1. Mainline operations only. 2. Load factor includes scheduled service only. 3. Preliminary figures only; percent change in load factor is not available during release.

Sources: Carrier traffic reports.

Page 4 February 2008

InterVISTAS’ Canadian Aviation Intelligence Report Copyright ©2008 InterVISTAS Consulting Inc., all rights reserved.


2007 Annual Highlights – Top Three Canadian Airports: 1. Toronto – YYZ continues to handle the largest share of Canadian passenger traffic, despite modest overall growth of 1.7% and a small decline in transborder traffic by 0.5% over 2006. 2. Vancouver – All three sectors experienced moderate year over year growth, contributing to overall growth of 3.3% in 2007 over 2006. The international sector grew the most, at 4.6%. 3. Montreal – Total traffic increased by 8.6% in 2007 over 2006. While the growth in domestic and international traffic was strong (more than 10%), the transborder sector grew by only 1%.

Summary of Total Year-Over-Year Passenger Traffic Performance at Selected Canadian Airports

2006 2007

December 4th Quarter Full Year January February March 1st Quarter April May June nd 2 Quarter July August September 3rd Quarter October November December 4th Quarter Full Year

Toronto

Vancouver

+6.4% +4.3% +3.5% +3.0% +2.0% +1.5% +2.2% +0.7% +0.3 +1.3% +0.8% -0.4% +0.7% +1.5% +0.5% +3.7% +5.0% +2.8% +3.8% +1.7%

+6.2% +4.1% +3.1% +5.5% +2.7% +3.6% +3.9% +4.2% +2.4% +1.8% +2.7% +0.2% +2.6% +3.6% +2.1% +3.2% +7.7% +4.4% +5.2% +3.3%

MontréalTrudeau +8.7% +7.0% +4.7% +10.2% +7.1% +8.9% +8.7% +8.9% +6.3% +8.6% +7.9% +10.9% +10.4% +8.9% +10.1% +8.4% +6.1% +8.1% +7.3% +8.6%

Calgary

Edmonton

Ottawa

Winnipeg

Halifax

Victoria

Kelowna

Saskatoon

Regina

+11.4 +11.7 +11.1 +11.7% +11.7% +9.5% +10.9% +11.9% +8.6% +7.6% +9.1% +5.4% +7.1% +7.9% +6.8% +8.3% +8.0% +3.7% +7.1% +8.5%

+18.2% +17.4% +15.5% +18.3% +18.3% +17.1% +17.9% +18.8% +17.5% +22.2% +19.5% +17.8% +17.1% +12.4% +15.9% +13.9% +15.9% +8.2% +12.4% +16.3%

+3.8% +3.0% +1.7% +5.9% +8.3% +4.9% +6.3% +8.0% +7.3% +7.6% +7.6% +9.0% +6.6% +3.7% +6.4% +8.4% +11.0% +9.2% +9.5% +7.4%

+3.4% +6.4% +4.8% +3.2% +6.8% +5.4% +5.1% +12.2% +8.7% +7.5% +9.3% +3.9% +5.0% +1.9% +3.7% +3.5% +5.7% +3.8% +4.0% +5.5%

-2.4% +1.7% +4.6% +2.3% +2.0% -1.2% +0.9% +0.5% -2.5% +3.4% +0.4% +4.4% +4.4% +4.2% +4.3% +4.6% +5.7% +4.2% +4.8% +2.7%

-0.1% +3.9% +5.4% +4.7% +4.0% +7.9% +5.6% +9.6% +6.2% +1.9% +5.8% +6.7% +5.4% +6.1% +6.1% +8.0% +10.8% +8.1% +8.9% +6.6%

+14.5% +14.3% +14.7% +15.2% +12.9% +15.6% +14.6% +20.8% +17.8% +14.7% +17.7% +7.4% +9.2% +9.6% +8.7% +7.5% +4.2% +3.7% +5.0% +11.3%

+3.7% +4.5% +5.6% +6.7% +11.0% +5.7% +7.8% +12.1% +12.7% +11.6% +12.1% +4.6% +9.0% +7.9% +7.2% +7.2% +8.4% +7.5% +7.7% +8.6%

+10.2% +6.7% +8.0% +18.8% +24.2% +8.2% +17.0% +7.4% +9.9% +8.0% +8.4% +13.6% 5.7% +10.5% +9.9% +5.5% +9.1% +3.7% +6.0% +10.2%

St. John’s -1.1% +0.3% +6.0% +4.6% +10.9% +9.1% +8.1% +2.1% -4.2% -1.0% -1.2% -6.5% -5.8% -0.6% -4.6% +5.2% +0.8% -5.5% +0.5% -0.2%

Source: Transport Canada and individual airports’ traffic reports. N/A: not available at press time. Note: Subject to revision.

Page 5 February 2008

InterVISTAS’ Canadian Aviation Intelligence Report Copyright ©2008 InterVISTAS Consulting Inc., all rights reserved.


NEWS AIR CANADA UPDATE

WESTJET UPDATE

2007 FINANCIAL RESULTS

2007 FINANCIAL RESULTS

Air Canada reported record operating income of $433 million for the full year 2007, up from $236 million in 2006. This was due to an increase in operating revenue by 4%, accompanied by a reduction in unit cost of 1.2% in 2007 over 2006. Air Canada also achieved record operating income of $72 million during the fourth quarter of 2007 – a significant improvement from the $13 million operating loss in fourth quarter 2006.

EXPANDED OTTAWA SERVICE Air Canada announced the addition of non-stop flights between Ottawa and four new markets, including twice daily flights to Washington National and daily flights to both Thunder Bay and Charlottetown with the 50-seat Bombardier regional jet. It is also adding a daily Saskatoon flight using 75-seat Bombardier CRJ-705 regional aircraft. These new services will be operated year-round by Air Canada Jazz, beginning 1 May 2008.

NEW FLIGHTS TO THE U.S. Air Canada also announced three other yearround non-stop services, in addition to the new Ottawa-Washington service. Starting 1 May 2008, the carrier will operate daily flights between Toronto and Austin, Texas, using 75seat Bombardier CRJ-705 Jazz regional aircraft, and twice daily flights between Toronto and Richmond, Virginia, using 37-seat Jazz Dash 8 aircraft. Air Canada will also begin daily service between Calgary and Chicago on 15 May 2008, using 93-seat Embraer E190s.

AGREEMENT WITH HOTELS.COM

Air Canada recently signed a multi-year agreement with hotels.com, an operating company of Expedia, Inc. This gives Air Canada customers complete online access to hotels.com’s inventory of more than 75,000 properties and allows Aeroplan miles to be earned for qualified hotel bookings. Page 6 February 2008

WestJet reported record net earnings of $75.4 million in the fourth quarter of 2007, up 182% from the same quarter of 2006. This had a positive contribution to 2007’s full year financial results, with net earnings totalling $192.8 million in 2007, up 68.2% from 2006.

NEW TORONTO-QUÉBEC CITY SERVICE WestJet announced new daily non-stop service between Québec City and Toronto, with onward service to Edmonton. The new service will launch on 18 May 2008, as part of the celebration of Québec City’s 400th birthday.

SUMMER SEASONAL FLIGHTS LAUNCHED

WestJet announced new summer seasonal service on various routes beginning 18 May 2008. These include daily non-stop service for the following routes: Toronto-Regina, TorontoSaskatoon, Toronto-Abbotsford, EdmontonOttawa, and Halifax-Ottawa. WestJet will also increase the frequency of flights from Toronto to Victoria, Vancouver, Edmonton, Charlottetown, Moncton, Saint John, and Deer Lake, as well as between Montreal and Halifax and between Calgary and Ottawa.

OTHER CANADIAN AIRLINES ZOOM AIRLINES EXPANDS TO ROME Zoom Airlines announced the expansion of its European network with new service to Fiumicino Airport in Rome, Italy. Twice weekly flights between Toronto and Rome will commence on 3 May 2008 and weekly flights between Montréal and Rome on 6 May 2008.

InterVISTAS’ Canadian Aviation Intelligence Report Copyright ©2008 InterVISTAS Consulting Inc., all rights reserved.


NEWS – CON’T OTHER CANADIAN AIRLINES – CON’T PORTER AIRLINES INTRODUCES TORONTO-NEW YORK SERVICE

Porter Airlines announced its expansion into the U.S. market, with the introduction of Toronto-New York service, beginning 31 March 2008. This new service between Toronto City Centre Airport and Newark Liberty International Airport will have seven daily flights on weekdays, two daily flights on Saturdays and three daily flights on Sundays. The service will be operated using 70-seat Bombardier Q400 aircraft.

U.S. AIRLINES SHUTTLE AMERICA ADDS NON-STOP QUÉBEC-CHICAGO SERVICE

Shuttle America, United Express’ partner, will introduce new non-stop service between Québec Jean Lesage and Chicago O’Hare, beginning 5 June 2008. This daily service will be operated using 70-seat Embraer 170.

CARGO BOEING STARTS MAJOR ASSEMBLY OF 777 FREIGHTER Boeing began major assembly of its new 777 Freighter aircraft on 29 January 2008. The 777F will be able to fly longer distances and provide more capacity than any other twin-engine cargo airplane, with a flying range of 9,045 kilometres and a revenue payload capability of over 226 thousand pounds. Air France will be the first customer to receive the aircraft, scheduled for delivery during the fourth quarter of 2008. Boeing has received orders for 80 aircraft from 11 customers.

Page 7 February 2008

CARGOJET LIVE ANIMAL PROGRAM

Cargojet announced plans to enhance its live animal air cargo programs. Cargojet specialises in transporting various live animals, including horses and cattle, in compliance with the International Air Transport Association’s Live Animal Regulations (LAR).

AEROSPACE AIRBUS JANUARY ORDERS

Airbus received more than three and a half times the orders as Boeing in January 2008. Airbus recorded a total of 238 aircraft orders for the month, with 110 A320 aircraft orders from CASGC, China’s central aircraft purchasing organisation, and 75 A320 aircraft orders from Dublin-based lessor AWAS. Airbus also made 37 aircraft deliveries in January 2008, exceeding Boeing’s delivery count of 34 aircraft.

FURTHER 787 DREAMLINER DELAYS

Boeing announced further delays in the production of 787 Dreamliner jets, with its first test flight rescheduled from the end of March 2008 to June 2008 and aircraft deliveries postponed from late 2008 to early 2009.

BOMBARDIER RJ BUSINESS EXPERIENCES SHARP REBOUND Bombardier recorded regional jet (RJ) orders totalling 140 for the fiscal year ended 31 January 2007, up sharply from its 49 RJ orders in 2006 and 37 RJ orders in 2005. With the highest number of RJ orders since 2001, fiscal year 2007 for Bombardier nearly matched its competitor, Embraer, who recorded 146 RJ orders in its fiscal year ended 31 December 2007. The sharp rebound in Bombardier RJ orders is a result of Bombardier’s 90-seat CRJ900 orders and the CRJ1000 aircraft that is currently under development.

InterVISTAS’ Canadian Aviation Intelligence Report Copyright ©2008 InterVISTAS Consulting Inc., all rights reserved.


NEWS – CON’T TRANSAT RENEWS SUSTAINABILITY PROGRAM

PEOPLE IN THE NEWS JAMES HUNTER – RAA

The Board of Directors of the Regina Airport Authority Inc. (RAA) announced the appointment of James Hunter as its new President and Chief Executive Officer, effective 1 March 2008. Mr. Hunter is a retired Brigadier General with more than 35 years of experience in executive positions.

NATALIE LAUZON – CTC

The Canadian Tourism Commission (CTC) recently appointed Natalie Lauzon as Manager of Overseas Marketing. Ms. Lauzon has more than seventeen years of marketing and sales experience in the travel and tourism industry. Since she joined CTC in 2005, she played an integral role in many successful campaigns in the European and Latin American markets.

JEAN-SEBASTIÉN LESAGE – CTC

The Canadian Tourism Commission (CTC) announced the appointment of Jean-Sébastien Lesage as Manager, Labour Relations and Employee Relations at the CTC, effective 8 February 2008. Mr. Lesage previously worked in human resources at Hydro-Québec and Bell Canada. He joined the CTC in late 2005.

JILLIAN GREENWOOD - NBCTA

The Northern BC Tourism Association (NBCTA) announced the appointment of Jillian Greenwood as Manager, Industry Relations and Trade. Ms. Greenwood will be responsible for maintaining stakeholder relations for NBCTA’s new satellite office in Prince Rupert. Ms. Greenwood previously held the position of Director of Marketing for Tourism Prince Rupert.

OTHER 2007 A RECORD YEAR FOR TORONTO’S TOURISM INDUSTRY The Toronto tourism industry experienced a record year in 2007. $4.5 billion in visitor expenditures resulted from the record 10.6 million visitors that stayed overnight in Toronto during 2007. Page 8 February 2008

Transat A.T. Inc. announced plans to renew its program that offers up to $50,000 in financial support for communities or not-for-profit organisations in its destination countries to carry out sustainable tourism projects. Transat is an integrated international tour operator offering tour packages for more than 60 destination nations, operating mainly in Canada and Europe.

TOURISM GROWS TO 900 MILLION

The World Tourism Organisation reported that tourism arrivals grew by 6% in 2007 and has almost reached the 900 million mark. Growth from 800 to 900 million arrivals was achieved in only two years. Long term, tourism grows at 4.1% per year. The Middle East achieved the highest rate of growth in 2007, at 13%, with Asia Pacific growth at 10%.

TOURISM BAROMETER DECLINES FOR 2008 The World Tourism Organisation reported that the World Tourism Barometer for 2008 declined to an index of 132 from 143 in 2007. This is the lowest value since it fell to 119 during the SARS pandemic in 2003. The Barometer is constructed from opinions of the UN-WTO's Panel of Experts and reflects an expectation of tourism growth. InterVISTAS' Dr. Mike Tretheway is a member of the UN-WTO panel.

STEPHENVILLE AIRPORT RECEIVES $2.3 MILLION IN ENVIRONMENTAL REMEDIATION Newfoundland and Labrador’s Stephenville Airport received CAD$2.3 million in environmental remediation from the Government of Canada, administered by the Ministry of Fisheries and Oceans and Transport Canada. The funding will be used to remove and replace groundwater and sub-surface soils that were contaminated by petroleum, as well as treat contaminated waters onsite at the airport.

InterVISTAS’ Canadian Aviation Intelligence Report Copyright ©2008 InterVISTAS Consulting Inc., all rights reserved.


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CARIBBEAN REPORT February 2008

Improved Airlift to the Region

Jacqueline Clarke Manager, Strategic Development

A number of local and international carriers announced services to new and existing destinations within the Caribbean. Effective March 2008, Air Jamaica will increase flights between Jamaica and Orlando to a daily service. New York-based JetBlue Airways will add its first international service from Florida with the launch of daily nonstop service from Orlando to Santo Domingo, Dominican Republic in March 2008. JetBlue will also add a second daily nonstop flight between Orlando and Aguadilla, Puerto Rico, beginning 1 May. This summer, the airline will offer Orlando travelers a total of six daily nonstop flights to Puerto Rico, including three to San Juan, two to Aguadilla, and one to Ponce. American Airlines will add a seasonal flight for the peak summer travel period between Port of Spain, Trinidad and Miami, commencing in April and running until September. Copa Airlines will begin the first service between Trinidad and Panama in March 2008. Flights will operate four times per week to the island’s capital. And finally, British Airways announced changes to its Caribbean routings, effective 26 October 2008. Flights from London Gatwick to St Lucia will increase from two to three each week and operate non-stop rather than flying via Antigua. Flights from Gatwick to Port of Spain will operate via St Lucia rather than Barbados.

IATA Urges the Adoption of Regional Aviation Policies The recently-completed IATA report on the state of the aviation and airport industries in the Caribbean identifies the need for governments to “remove obstacles such as fragmentation and undue taxation” in order for the regional aviation industry to become profitable. The report goes on to cite the disparity in taxation levels between the cruise and airline industries. The average airline passenger pays $30 versus the cruise passenger tax of $1. The report recommends that “airports work together with the airlines on long term strategies,” and added that the airports need to “create commercial revenue opportunities” and suggests the implementation of cost-cutting efficiencies such as installation of kiosks. The report’s author urged the Caribbean airport authorities to establish a “harmonization of services, standardization of infrastructure and reduce the number of providers as the key to reduced costs.”

Third International Airport for Jamaica Prime Minster Bruce Golding recently announced the government’s intention to develop a private sector-funded international airport as part of its plan to diversify the island’s tourism product. Duckenfield in Portland, on the island’s north-east coast, will be the site for the new facility which will feature an 8,000-foot runway with a small terminal and customs and immigration clearing facilities to accommodate private aircraft and mid-sized passenger jets. Replacing the long commute by road with direct air access is expected to open up the eastern part of the island for major tourism investments and commercial activities such as free-trade zones. The PM has mandated the Urban Development Corporation and Jamaica Civil Aviation Authority to conduct feasibility studies, including a comprehensive cost analysis to be submitted to Cabinet before new budget debate begins in April.

Antigua-Barbuda New Airport Terminal Development The Government of Antigua and Barbuda signed a Memorandum of Understanding (MOU) with the China Civil Engineering Construction Corporation (CCECC) calling for discussions to commence with the Government of China on the provision of concessionary loans. Earlier this year, the Chinese government made available US$600M in soft loans for assistance to ten Caribbean countries. Antigua and Barbuda hopes to secure a share of the available monies for the construction of a new terminal building at the V.C. Bird International Airport and the upgrading of the St John's Deep Water Harbour. CCECC will provide technical assistance to the Antigua and Barbuda government in the form of design briefs following site surveys, preliminary costing and the preparation of working documents among other things. Page 10 February 2008

InterVISTAS’ Canadian Aviation Intelligence Report Copyright ©2008 InterVISTAS Consulting Inc., all rights reserved.


ASIA REPORT February 2008

Hong Kong and Japan Finalise Air Service Consultations The new air services agreement between Hong Kong and Japan allow for unlimited passenger and cargo services between Hong Kong and all points in Japan, with the exception of Tokyo. New services are likely between Hong Kong and Kagoshima and Okayama with increased services between Hong Kong and Osaka, Nagoya, Fukoka, Sapporo, Sendai and Okinawa.

Qantas and ALEA Reach Four-Year Agreement Qantas Airlines and the Australian Licensed Aircraft Engineers Association (ALEA) reached an ‘inprinciple’ four-year agreement this month. If the terms are accepted in an official vote, more than 1,500 Qantas Engineering employees will be affected by the terms, which are aimed at providing increased wages and a more flexible work environment.

Doris Mak Manager, Special Projects

Cathay Launches Second Aircraft Decorated with their ‘Asia’s World City’ Design Cathy Pacific unveiled its new 777-300ER, the second Boeing aircraft in Cathay’s fleet to bear their ‘Asia’s World City’ motif depicting a dragon flying over green waves. The purpose of these newly decorated aircraft is to highlight Hong Kong on the global stage and the role Cathay Pacific plays in raising the profile and contributing to the economic success of Hong Kong. This recent purchase is the beginning of a trend at Cathay to expand its fleet with aircraft that will enable the airline to fly more direct flights to North American destinations.

QantasLink Awarded New Air Services Contact by Queensland Government The Queensland Government has renewed QantasLink’s air service contract for the third time, extending the carrier’s service in the region for another five years. The contract covers service from Brisbane and Cairns to Longreach, Barcaldine, Blackall, Charleville, Roma, Weipa and Horn Island. QantasLink intends to increase capacity and services while reducing travel times and resident fares, partially through their recent investment in twelve new Q400 aircraft.

GoAir Announces its Flexible Fare Plan Indian airline, GoAir, has announced its GoFlexi Fare plan. The Plan allows passengers the flexibility to make changes and rebook flights without being charged a fee. Under the GoFlexi plan, passengers will need to cover the difference in cost for rebooked flights, but any credits that are accrued will be saved in the passenger’s account for use within six months. In addition, charges for cancellations are reduced to INR200 (CAD$5) for all bookings.

Page 11 February 2008

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EUROPEAN REPORT February 2008

European Clean Sky Initiative Launched The Clean Sky Initiative, one of Europe’s largest research and technology programs, was launched this month. The Initiative’s budget of €1.6 billion will be funded by both the European Commission and the aviation industry. The program’s goal is to develop new technologies, including SMART fixed-wing aircraft, thermal management, and green aircraft, rotorcraft and engines, which will then be demonstrated in the final year of the program. The aim is to have these technologies available for aircraft entering service after 2015.

John Weatherill Regional Vice President, InterVISTAS-E.U. UK Office

Meanwhile, Airbus has issued a statement welcoming the launch of the Clean Sky Joint Technology Initiative. Airbus intends to contribute to the initiative by playing a major role in the development of active wing technology. The hope is that active wing technology will help the Initiative achieve the Advisory Council for Aeronautics Research Europe’s ambitious target of a 50% reduction in CO2 emissions by 2020.

EasyJet Acquires GB Airways The acquisition of GB Airways by EasyJet Airline Company Ltd. was completed this month with a payment of £103.5 in cash. The sale further solidifies EasyJet’s place as the principal short haul carrier in the United Kingdom, which, according to Andy Harrison, Chief Executive of EasyJet, now operates 18% of available seats. As a result of the purchase, EasyJet will be able to increase services to London Gatwick and offer services to Manchester for the first time.

European Commission and Israel Develop Air Transport Agreement The European Commission and Israel’s Ministry of Transport have settled on the language of an air transport agreement that would see all current bilateral air service agreements between Member States and Israel fall into accordance with EU law. This new agreement eliminates restrictions related to nationality in existing bilateral agreements, allowing EU carriers to operate flights between Israel and any EU Member State where they are established. This is part of what, the EC hopes, will become a comprehensive EU-Israel Euro-Mediterranean aviation agreement which would create an open aviation area between Europe and Israel with common regulatory conventions.

Ryanair Booking System Offline from February 22nd to February 25th Ryanair is moving over to its new flight booking system and consequently will be shutting down its online and call centre booking system for four days at the end of February. The move is the result of a UK Office of Fair Trade (OFT) directive that requires all taxes and fees to be included in the ticket price. Currently, the carrier already has all-inclusive prices listed on the home page but needs to add the tax-inclusive prices to the website’s middle pages in order to meet OFT standards.

Page 12 February 2008

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OTTAWA REPORT February 2008

Canada’s Competition Bureau Suggests Open Skies Canada’s Competition Bureau recently submitted their recommendation for the Canadian Government to adopt an open skies regime, by eliminating foreign ownership restrictions for air carriers or increasing foreign ownership limits from the current 25% to 49.9%. The Bureau also recommends for wholly foreign owned carriers to be granted permission to serve routes within Canada. The Air Transport Association of Canada responded to these recommendations by arguing that Canada “shouldn’t give away access to our marketplace” unless the opportunity was reciprocated to benefit Canada as well.

CTA Decides in Favour of One-Person-One Fare Applications Martin Copeland Senior Vice President, Aviation

The Canadian Transportation Agency (CTA) announced its decision to adopt the one-person-one-fare policy for persons with severe disabilities for domestic air travel in Canada. CTA requires selected air carriers to assess the eligibility of the policy on a case-by-case basis. So far, Air Canada, Air Canada Jazz and WestJet have been ordered by the CTA to develop a screening process to determine these eligibility measures and to implement the policy within a year, effective 10 January 2009. The One-Person-One-Fare Applications mean that the selected carriers may not charge more than one fare for disabled persons who are either accompanied by an attendant for their personal care or safety in flight or require additional seating for themselves. This rule does not apply to “persons with disabilities who prefer to travel with a companion for personal reasons; persons with disabilities who require a personal care attendant at destination, but not in-flight; and persons who are obese but not disabled as a result of their obesity.”

CTA Approves Various Airports to Participate in the International Transshipment Program The Honourable Lawrence Cannon, Minister of Transport, Infrastructure and Communities, announced that the approval of Vancouver International Airport, Greater Moncton International Airport and Abbotsford International Airport to participate in the international transshipment program. The program authorizes any Canadian or foreign air carrier to transship air cargo from a foreign country to a third nation through Canada, via these Canadian airports. International air cargo could also be shipped from a foreign country to Canada and then carried to the United States by road or rail. The program also allows airlines to combine these cargo transshipments with its other licensed services. Introduced in 1982, the international transshipment program offers cargo transshipment rights to Canada’s airports, even if these rights are not provided in Canada’s bilateral air transport agreements. Other Canadian airports already involved in the program include Montréal, Hamilton, Windsor, Gander, Winnipeg, Edmonton and Calgary.

Fifth European Airport to Use NAV CANADA technology Denmark’s Copenhagen Airport is the fifth European Airport to use NAV CANADA technology to monitor and guide its aircraft. Now an integral component of the newly upgraded air traffic management system at Copenhagen Airport, the Naviair Integrated Tower Operating System (NITOS) was derived from NAV CANADA’s Extended Computer Display System (EXCDS). The EXCDS technology provides controllers with a paperless method of monitoring aircraft and managing air traffic flow, with the use of touch-sensitive computer screens. Thus, the system “improves efficiency and enhances the quantity and flow of flight data,” according to Morten Dambaek, Director General of Naviair, the Danish air navigation service provider at Copenhagen Airport. Previously, the system was also installed at London Heathrow International Airport, the most recent among four other airports in the London area. Page 13 February 2008

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WASHINGTON REPORT February 2008

United States and Australia Reach Open Skies Agreement The United States and Australia announced the signing of an Open Skies aviation agreement between the two countries on 8 February 2008. Under this new agreement, both U.S. and Australian air carriers are no longer restricted on the number of flights operated between the two countries. The agreement will also allow joint marketing initiatives, including code-sharing between carriers, and eliminate all restrictions on capacity and pricing. Previous arrangements between the U.S. and Australia prohibited new airlines from operating more than four weekly flights on the route. As a result, Qantas and United Airlines are currently the only carriers serving the trans-Pacific route. With the new agreement in place, V Australia, Virgin Blue’s startup carrier, will be able to proceed with its plans to operate ten weekly flights between Australia’s east coast and the U.S. west coast by year-end 2008, using Boeing 777-300ER aircraft.

Jon Ash President InterVISTAS-ga2 Consulting Inc. Washington, D.C.

Justice Department Regulators Approve Midwest Sale The U.S. Department of Justice approved the purchase of Midwest Air Group Inc. to TPG Capital, a private equity firm, for $450 million in cash. The sale agreement was originally made between Midwest and TPG Capital in August 2007. The deal includes Northwest Airlines Corporation as a passive investor, in which 47% of the sale price was contributed by Northwest. However, Northwest agreed to not participate in the management of Midwest. Under the deal, Midwest will be allowed to operate under its own name.

Air Carriers Appeal TSA Decision for Retroactive Fees U.S. and foreign carriers are appealing the decision of the Transportation Security Administration (TSA) to charge a collective annual fee of $98 million. Retroactive to 1 January 2005, these fees are for passenger and baggage screening at U.S. airports.

FAA Lowers Philippines’ Safety Rating to Category 2 The U.S. Federal Aviation Administration (FAA) lowered Philippine airline operations to Category 2 to reflect its safety concerns. This means that Philippine Airlines, the only Filipino carrier currently servicing the U.S., did not comply with the aviation safety standards set forth by the International Civil Aviation Organization (ICAO) and will be subject to increased surveillance by FAA. Under the downgraded Category 2 rating, Philippine Airlines will not be allowed to change its aircraft type or increase its capacity on U.S. routes. As a result, the carrier will not be able to undertake additional flights to San Diego, New York and Saipan, as originally planned. The safety downgrade will also prevent delivery of the six new Boeing 777-300ER aircraft scheduled for next year. On a larger scale, this will have a negative effect on tourism, cargo traffic and investment inflow for the Philippines. Gloria Macagapal Arroyo, President of the Philippine Government, responded to the ruling by ordering Transport Secretary, Leandro Mendoza, to conduct an air safety audit and to address the concerns of FAA within a three month period. Furthermore, the government provided $2.6 million in funding to update safety features for Philippine air operations.

Industry Coalition Teams Up to Improve Runway Safety A coalition of airlines, airports, air traffic control and pilot unions and manufacturers, have agreed to work together, under the leadership of Acting Federal Aviation Administrator, Bobby Sturgell, to determine methods for improving airport safety, especially problems relating to runway incursions and wrong runway departures. Some of the coalition’s short-term actions completed so far include: upgrading airport markings for 53 out of 75 airports; analysing runway incursion and wrong runway departure data for 20 airports; requiring recurrent training for non-airport employees, such as fixedbased operators or airline mechanics, at 385 airports; requiring additional training for pilots and other carrier employees; and analysing air traffic control procedures on taxi clearances. Page 14 February 2008

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INTERVISTAS NEWS Paul Stewart Joins InterVISTAS’ Vancouver Office as Associate Consultant in Greenhouse Gas Accounting InterVISTAS Consulting Inc. is pleased to announce that Paul Stewart has joined as an Associate Consultant in the environmental practice. Mr. Stewart is a specialist in greenhouse gas accounting and management. His expertise includes measuring greenhouse gas inventories for businesses, setting greenhouse gas targets and developing carbon reduction strategies. His 15 years of experience includes banking and finance, technology company start-up and operations, and running a small business finance incubator. He holds a Bachelor of Business Administration in Marketing Strategy and International Business. Mr. Stewart will be responsible for conducting greenhouse gas audits of private and public sector organizations. He will assist clients in developing greenhouse gas accounting policies and procedures, publishing greenhouse gas reports and providing tools to track future emissions.

Sandra Stoddart-Hansen Joins InterVISTAS’ Vancouver Office as Executive Consultant InterVISTAS is pleased to announce that Sandra Stoddart-Hansen has joined InterVISTAS as an Executive Consultant. Sandra brings to our clients extensive experience in managing public affairs and public relations consulting assignments. In addition to her consulting background, Ms. Stoddart-Hansen brings industry experience at the executive level in government relations, human resources and management. Her public service work included senior management roles with the Public Service Commission of Canada, the Aviation Group of Transport Canada, as Director General with the Federal Department of Justice and as Vice President, Human Resources for the BC Children’s Hospital. Her private sector experience includes Vice President and General Manager for Hill and Knowlton’s Vancouver office where she assisted clients with the design and implementation of integrated government and public communications programs, and President of Alpha Aviation Inc., which managed the Boundary Bay Airport.

Page 15 February 2008

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INTERVISTAS NEWS – CON’T InterVISTAS Upcoming Speaking Engagements Dr. Mike Tretheway, Executive Vice President, Marketing & Chief Economist • ACI-NA Marketing and Communications Conference and JumpStart® Air Service Development Program: Pittsburgh, Pennsylvania – 23 June 2008 Dr. Tretheway will be delivering a presentation titled, “State of the Aviation Industry.” • Canadian Transportation Research Forum Annual Meeting: Fredericton, New Brunswick – 2 June 2008 Dr. Tretheway will be delivering a presentation titled “Essential Priorities for Canada’s Air Transport System.” Paul Ouimet, Executive Vice President, Business & Strategic Planning • ACPA 7th Annual Port/ Government Interface Conference: Ottawa – 27 February 2008 Mr. Ouimet will be delivering a presentation titled “Trade Corridors and Gateways: More than the Pacific.” Rob Beynon, Vice President, Development Economics • Southern Illinois Economic Development Conference: Carbondale, Illinois – 20 March 2008 Mr. Beynon will be delivering a presentation titled “International Transportation Trend Impacts on the Mid West.” Mark Haneke, Vice President, Network and Strategic Planning • AAAE/ Great Lakes National Air Service Conference: San Antonio, Texas – 24-26 February 2008 Mr. Haneke has been invited to participate on an air service development forum panel. Joe Kelly, Director, Environmental Services • B.C. Tourism Industry Conference: Vancouver – 20 February 2008 Dr. Kelly will join a panel of industry leaders to judge a student case competition on climate change. The competition will see tourism and hospitality students from colleges and universities around the province debate how the province can double tourism revenues by 2015 while facing global climate change concerns. InterVISTAS’ Canadian Aviation Intelligence Report is a collection of information gathered from public sources, such as press releases, media articles, etc., information from confidential sources, and items heard on the street. Thus, some of the information is speculative and may not materialise. To inquire about advertising opportunities or to provide comments/feedback on the InterVISTAS’ Canadian Aviation Intelligence Report, please contact Rob Beynon at rob_beynon@InterVISTAS.com or 1-604-717-1864. To subscribe, please send an email to subscribe@InterVISTAS.com To unsubscribe, please send an email to unsubscribe@InterVISTAS.com Page 16 February 2008

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CAIR Issue No. 59 - February 2008